Microsoft Still Flushing $2 Billion A Year Down The Online Drain

Microsoft's Windows 7 is blowing
the doors off, but the company's online division continues to
piss away a fortune.

How much, exactly?

Nearly $2 billion a year.

$2 billion a year is actually a lot of money, even for
Microsoft. And it puts the 3 points of market share the
company's search engine Bing has gained since last summer's
launch in perspective. (That's $750 $667 million per
point).

In case you had any doubt that Microsoft was buying these share
gains, by the way, we now have confirmation. Take a look at
this helpful language in the company's 10Q:

Ad revenue in
Microsoft's online business, meanwhile, dropped 2% to $516
million. Search revenue is part of that revenue. The
search portion of the revenue grew, and the display portion
shrank. But it seems highly unlikely that search revenue
grew more than $150 million year over year.

Which
means...

Microsoft
spent more buying traffic to Bing than it generated in new
revenue from Bing, even before accounting for all its overhead
and marketing costs. That $150 million also doesn't include
the $100 million Microsoft spent on the Bing launch
campaign.

We therefore
reiterate what we've been saying for the past three years: We
have seen no indication whatsoever that Microsoft will ever build
a successful Internet business. And we don't think we ever
will.

But in the
meantime Microsoft seems intent on flushing billions of those
Windows dollars down the drain.